Category Archives: Business/Parastatals

Catching Up on Kenyan Politics–Three Related Big Developments on Reform

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The past three months or so have been especially busy for me and I have to apologize for having to let go of my past practice of at least noting most of the major headlines in Kenyan politics on a current basis.  Likewise, what I have posted has been more heavily weighted toward quotes and citations to other sources and less original.

First, the big issue that I have largely taken a pass on has been the nomination and appointment of the new Supreme Court, especially the Chief Justice.  I will say that the new Chief Justice Willy Mutunga got off to a good start yesterday, in my book, by forsaking the traditional robe and wig for his swearing in.  My more egalitarian American sensitivities have always been turned off by the white wigs–we rebelled against the British and got rid of all that a long time ago.  I can appreciate decorum and a sense of dignity for the court, but I’m not sure that the white wig is even really dignified as opposed to just silly.  And in a country with as much of a problem with dramatic inequality both economically and in the legal and judicial system, it seems to me that a bit of humility is a positive thing.

More importantly it is encouraging to see the hope engendered by Mutunga’s appointment.  Mutunga has a combination of serious bona fides as a reformer through leadership in the “Second Liberation” and serious legal credentials.  Here is a column from retired Presbyterian minister Dr. Timothy Njoya that I found to be particularly persuasive in this regard.  He is obviously qualified in training and intellect, but was also seems chosen by the Judicial Service Commission in substantial part to be a leader of reforming the judiciary through his position as Chief Justice.  My interest is the process, and I don’t think it is my place as an American to have a strong opinion about who should or shouldn’t be appointed to a judicial position in Kenya, but it is gratifying to see Kenyan civil society leaders and others whom I like and admire for their courage in the context of the late Kenyan election crisis feel that Mutunga’s appointment is a step toward reform and the rule of law.

In considering the process, I will way that the JSC was a bit harsh on some applicants and I hope that in the future this will be improved on.  Here is a column in the Star saluting one of the applicants whom I had the opportunity to meet socially and found to be a very considerate person who ended up being charactured a bit in the media as a result of her interview.  A woman who has served long on the Kenyan High Court without hint of scandal deserves respect as a pioneer and the JSC certainly could have chosen reasonably to go in the direction of seeking someone with experience on the bench.

On the other hand, the appointment of the Director of Public Prosecution is quite a different matter.  Keriako Tobiko was nominated and approved in spite of very serious and specific allegations of corruption.  It is very hard to understand why this appointment makes any sense unless it is intended to protect key people from public prosecution–I wish this was a far fetched notion.  In fact, the situation seems blatant enough to almost make one wonder whether there was an “understanding”–a reformist chief justice for an insider as prosecutor to make sure that the weight of the law does not fall on the current powers that be?

A third big event that I have not discussed is the effort by the U.K. to gain extradition of Chrysanthus Okemo and Samuel Gicheru for prosecution for prosecution in Jersey.  Okemo, a member of parliament and former finance minister, and Gichuru, a former managing director of Kenya’s power supply monopoly the Kenya Power & Lighting Co. Ltd., are wanted in Jersey on corruption charges.  The allegations are that Gicheru took bribes from KPLC contractors and laundered the money to accounts in Jersey.  Payments are also alleged to have gone to Okemo as Finance Minister and as well when he was Energy Minister.

Frankly the British just have not had the best history on fighting graft involving the developing world and this initiative seems to me to be a breakthrough, consistent with the spirit of the new U.K. anti-bribery act.   I firmly believe that the ability of the “well connected” to stash ill gotten gains abroad with impunity has been a key factor in keeping most Kenyans economically marginalized and keeping the Government of Kenyan underperforming.  If the U.K is successful in this prosecution it could be a turning point toward a better pattern of development in Kenya in which the benefits of economic growth reach more citizens.

Ironically, however, Director of Public Prosecutions Tobiko is in a key role in evaluating the extradition request:

The government has ordered the formation of a high-level panel to consider a request for the extradition of former power utility boss Samuel Gichuru and Nambale MP Chris Okemo over fraud charges.

Attorney-General Amos Wako said he had received a full extradition request comprising 13 bundles of supporting documentation from Jersey Island.

As a result, Mr Wako said, he had instructed the chief public prosecutor to constitute the panel.

“Due to the complexity, magnitude and voluminous nature of the request, I have directed the chief public prosecutor, Mr Keriako Tobiko, to immediately constitute a high level team to study and analyse the supporting documentation and deal with the matter soonest,” Mr Wako said in a statement.

Sources said Mr Tobiko had constituted the team.

“Panel to decide fate of Okemo, Gicheru”, Daily Nation, 10 June 2011.

Key New Report from AFRICOG on Kenyan Privatization Ahead of 2012 Election

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AFRICOG, the African Centre for Open Government, in Nairobi has released “Deliberate Loopholes” an extensive report on the the privitization/divestiture of Telkom Kenya and Safaricom.  Just as the Safaricom deal went through just before the 2007 election in spite of ODM litigation to block it, new deals are coming with the 2012 election approaching, including likely sale of the Government of Kenya’s stake in 11 more hotels, for example:

“Deliberate Loopholes”describes some of the lapses that occurred in the privatisation of Telkom Kenya and Safaricom: the title refers to the deliberate evasions and subterfuges that created a fertile climate for asset stripping and corruption by senior officials whose identity continues to remain shrouded behind the veil of secrecy provided by international tax havens and off-shore financial centres. The preliminary findings of this study were presented to Parliament’s Public Accounts Committee (PAC), which took the matter to the floor of the House.

AfriCOG’s interest in this area stems from its mandate to build and entrench an anti-corruption culture through informed and determined public action, both in the public and private sectors. Effective privatisation requires a robust regulatory environment. Regulators need to be independent in delivering on their mandate and achieving outcomes that protect the public interest and advance Kenya’s development. However, these bodies face the constant reality or threat of capture by special interests.

Kenya is currently engaged in an extensive series of privatisation exercises, with around 23 majorpublic enterprises slated for or engaged in some sort of privatisation. The unanswered questions surrounding the sale of the Laico Grand Regency Hotel are still fresh in the public’s memory. By providing objective information on the privatisation of Telkom Kenya and Safaricom, AfriCOG aims to promote public knowledge and vigilance on other public divestment ventures. Furthermore, the general public has a huge stake in privatisation considering the significant investments that citizens have made in building these institutions in the first place and the gains that ordinary investors hope to make from their divestiture.

Given the market dominance of the entities involved and the endemic corruption that plagues Kenya, it is perhaps inevitable that many of these exercises have been shrouded in political controversy. From experience, large scale privatisation is a process that can be particularly prone to political corruption, or the theft of public resources to fund elections. Since 2012 portends a particularly hard-fought and conflictual election,
heightened scrutiny against possible abuse of privatisation of state-owned enterprises with the aim of financing politics would be prudent.

Africa Bureau announces vision to revitalize AGOA

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Assistant Secretary of State Johnnie Carson at CSIS from African Press Organization (APO):

While AGOA has achieved a certain amount of success, it has not solved Africa’s challenges and the region has not experienced a genuine economic revolution. Africa also continues to struggle to compete in an increasingly competitive global economy. For these reasons I am fully committed to revitalizing AGOA.

AGOA remains the centerpiece of our trade and investment policy with Africa. In 2012 the third country multi-fiber provision which allows textile producers to source their raw materials from other countries is set to expire and in 2015 the AGOA legislation itself will end. I would like to outline the State Department Africa Bureau’s vision for the next steps on AGOA:

1. Renew AGOA through 2025. The uncertainty about renewing the legislation creates a disincentive for potential investors to source production in AGOA eligible countries.

2. Renew the Third Country Multi-Fiber provision through 2022. The rules of origin for fabric under AGOA are one of the most important incentives to invest in textile production in AGOA eligible countries. This component of AGOA allows textile producers in AGOA countries to source their raw materials from other countries and still maintain their preferred access to the U.S. market.

3. Add South Africa to the Third Country Multi-Fiber provision. South Africa is the only AGOA eligible country not eligible for this provision and also the country best suited to take advantage of it.

4. Continue USAID’s Trade Hub and capacity building programs. Without this type of strong trade capacity building program AGOA cannot succeed.

5. Ensure that the Department of Commerce’s Foreign Commercial Service maintains their presence in Dakar and Accra. This is crucial not only for AGOA but for all of our economic initiatives in Africa.

6. Increase USDA’s capacity to provide phytosanitary certification. Agriculture exports remain an important and underutilized component of AGOA.

7. Tax incentives for earnings from AGOA investment. AGOA already provides substantial tariff savings for U.S. companies importing eligible products from Africa, but there are no other types of tax incentives provided under the legislation. Recommend that the U.S. government support an effort to eliminate the U.S. tax on repatriated revenues from American companies that invest in factories in Africa that produce AGOA exports to the US.

There has been a great deal of impressive economic news coming out of Africa recently. I am very encouraged by these positive developments. However, it is not the time for us to become complacent. Africa still faces huge challenges and we need to continue and revitalize our economic partnership. This is not only in the interest of our African partners, but in our interest as well. We need to maintain and improve upon AGOA today in order to continue to play a role in the growing dynamism in Africa tomorrow.

In the meantime, Russia is also seeking to “up its game” in African trade and investment.  Here is a link to “Buziness Africa”, a Russian magazine covering the subject, including AGOA.

Somaliland Turns 20 Today–Legal Next Year?

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More and more, Somaliland is being “discovered” in the media, and is attracting more interest and attention from international investors and businesses, and international organizations. As progress has been made in the south militarily against Al-Shabaab, but the TFG continues to face extensive institutional uncertainty, the time is surely approaching for other nations to start moving toward formalizing Somaliland’s status.

Good coverage this week in three stories and a multimedia presentation in the Financial Times.

Western Union adds Somaliland service, reports the UNPO:

The Western Union Company (NYSE: WU), a leader in global payment services, has extended its rapidly growing agent network to Somaliland, taking the total number of African markets it serves up to fifty.

The strategic agreement between Western Union and Global Exchange and Money Transfer, a subsidiary of Global Export and Import Agency Ltd, will see it offer the Western Union® Money TransferSM service for the first time in the area, initially at a location in Hargesia with additional locations to be rolled out across Somaliland in the course of 2011.

This follows a string of recent agent network expansions by Western Union, which last year celebrated 15 years in Africa and has grown its agent network on the continent to reach more than 22,000 Agent locations.

Somaliland has been receiving an estimated $1B per year in transfers from it’s diaspora, but inclusion in the Western Union network should make a variety of inflows easier and more “regular” for institutions.

Four out of the Five Members of the East African Community are among the 20 USAID “‘Feed the Future’ Focus Countries

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From a USAID press release, “USAID Administrator Rajiv Shah Announces 20 Feed the Future Initiative Focus Countries“:

In 2008, the Lancet identified just 36 countries that are home to 90 percent of all children whose growth was stunted for lack of adequate food. Based on this global burden of undernutrition and other criteria that examined the prevalence and dynamics of poverty, country commitment, and opportunities for agriculture-led growth, the 20 Feed the Future focus countries are: Ethiopia, Ghana, Kenya, Liberia, Mali, Malawi, Mozambique, Rwanda, Senegal, Tanzania, Uganda, and Zambia in Africa; Bangladesh, Cambodia, Nepal, Tajikistan in Asia; and Guatemala, Haiti, Honduras, and, Nicaragua in Latin America.

These countries experience chronic hunger and poverty in rural areas and are particularly vulnerable to food price shocks. At the same time, they demonstrate potential for rapid and sustainable agriculture-led growth, good governance, and opportunities for regional coordination through trade and other mechanisms. USAID will work with strategic partners Brazil, India, Nigeria, and South Africa to harness the power of regional coordination and influence in these focus countries.

Certainly it is encouraging that USAID finds Kenya, Uganda, Tanzania and Rwanda to present potential for rapid improvement–and perhaps the potential of the EAC itself is significant to this.   The listing is also a good reminder for Kenya that in spite of its significantly higher level of aggregate and per capita GDP, and overall growth, rural hunger remains all too common.  While this seems a constructive approach for USAID, I am skeptical that donors will  change the situation dramatically in Kenya until Kenya’s leaders share the priority to a greater extent than they have seemed to in recent years.

Fuel Distribution Crisis Hits Kenya, and Other Economic News

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“Kenya oil industry in chaos as fuel shortage bites”, reports the Daily Nation:

Motorists stood in long queues on Wednesday as one of the most severe and bizarre fuel shortages hit many parts of the country.

Many people ran out of fuel on the road while others were forced to leave their vehicles at home and take public transport. (IN PICTURES: Nairobi fuel crisis)

Petrol stations were forced to close after running out of fuel due to panic purchases.

The absence of petrol at the pump, particularly after the government confirmed that there was 19 million litres in storage tanks in Nairobi, is a commentary on the chaos in fuel distribution.

On Wednesday, the government passed the buck to the oil companies, accusing them of creating a shortage by refusing to order adequate stocks over the Labour Day holiday.

Today’s Star also reports that Prime Minister Odinga, speaking at Great Lakes University in Kisumu, said that the private sector is the only source for vital job growth:

He said the country must create a conducive environment for the private sector to thrive as a solution to the unemployment crisis. He said the private sector is the engine of economic growth thus the need for both local and foreign investors to increase investments that can create jobs for the youth.
Raila said the 750,000 graduates who join the labour market every year from schools, colleges and universities cannot find employment in the public service with about 50,000 job opportunities only every year.
He assured Kenyans that available positions in the public service will be distributed fairly among all the communities in the country in accordance with the constitution.
On education, the PM decried low levels of research in the country saying privave sector has refused to fund research unlike in other countries.
He said, the country needs to invest more on research work to provide more job opportunities.

The Star also reports additional international funding, from Germany, for geothermal power development:

THE 280 MW Olkaria geothermal power project by KenGen yesterday got a Sh7.4 billion boost from Germany’s Development Bank KFW to fund consultancy services and part of the steam field drilling works.

The money will fund extension of Olkaria one and Olkaria IV power station project targeted for completion by end of 2013. The overall cost of the project is Sh83 billion and is being co-funded by KenGen, World Bank, European Investment Bank, Japan International Corporation Agency and French Development Agency, AFD. “Development of renewable energy is excellent for development of Kenya and for the environment,” remarked KFW Director General for Middle East and Africa Doris Koehn during the loan agreement signing ceremony held yesterday at KenGen offices in Nairobi.

Cola Wars return to Kenya

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Miracle Cafe

Nairobi’s Business Daily reports that Coke is getting competition in Kenya:

Two international soft drinks manufacturing companies have set up local operations in a major shift tipped to shake up the industry currently in the tight grip of global giant Coca-Cola.

US multinational Pepsi Cola, and London based SABMiller are in the process of establishing a manufacturing presence in Nairobi even as market data points to a flattening market for soft drinks.

PepsiCo, which stopped bottling in Kenya under competitive pressure from Coca-Cola in the 1970s, is putting up a Sh2.4 billion plant off Thika and Baba Dogo roads while SABMiller has taken control of family owned Crown Foods, the bottlers of Keringet brand of drinking water.

PepsiCo has acquired 14 acres of land at Nairobi’s Ruaraka estate through SBC Kenya Ltd, a Franchise Bottler and Distributor of Pepsi products it bought in 2009, from where it will produce at least six of its brands.

.  .  .  .

PepsiCo made a marketing re-entry into Kenya late last year relying on imports to serve the local market with its brands such as Pepsi Cola, Pepsi Diet, Mirinda, Evervess Soda Water and Seven Up. Importing the soft drinks is more expensive than having a local production unit.

“We have already recruited 120 Kenyans — engineers, architects and technicians — to handle the development phase. We expect to have about 300 employers on board once it is completed,” said Mr Moldenhauer.

.  .  .  .

The soft drinks market is estimated at about 17 million litres annually and PepsiCo is upbeat that the sector has great potential for growth after shrugging off a heavy battering from the global economic crisis, high power costs and water rationing in most of 2009.

Nestle Chairman Says U.S. Biofuel Policy Causes Starvation at Time of Food Crisis

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Interestingly, the head of Nestlé lashed out at U.S. ethanol policy yesterday at the Council on Foreign Relations as reported in The Independent:

Today, 35 per cent of US corn goes into biofuel,” the Nestlé chairman told an audience at the Council on Foreign Relations (CFR) in New York yesterday. “From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world.
“It is absolutely immoral to push hundreds of millions of people into hunger and into extreme poverty because of such a policy, so I think – I insist – no food for fuel.”

Corn prices almost doubled in the year to February, though they have fallen from their peak in the past few weeks. Anger at rising food prices contributed to protests across the Middle East, and rising commodities costs were among the factors pushing UK inflation to 4.4 per cent in February, according to figures out yesterday.

US exports account for about 60 per cent of the world’s corn supply. Demand has surged as more people join the middle classes in emerging economies such as China and India, not just because these new consumers demand more food made from corn, but also because demand for meat has increased and livestock farmers need to buy more feed.

Nestlé, the company behind Shredded Wheat, Nescafé and Aero chocolate bars, has been lobbying European regulators and governments around the world against setting high targets for biofuel use, even though many countries see the production of ethanol as a means of meeting obligations to cut carbon fuel emissions.

The lobbying has fallen on deaf ears in the US, however. Ethanol production from corn is heavily subsidised, with output running at more than 13.5 billion gallons annually. Policies to promote its production are “absurd”, Mr Brabeck-Letmathe claimed yesterday, and meeting a mooted global target of having 20 per cent of fuel demand with biofuels would involve increasing production by one third.

“What is the result? Prices are going up. It’s not very complicated,” he said. “This question is now the number one priority for the G20 meeting in Nice, and the main thing we are going to do is fight against speculation. We are concentrating on the irrelevant.”

Speaking to farmers earlier this month, the Obama administration’s agriculture secretary said he found arguments from the like of Nestlé “irritating”. Mr Vilsack said: “The folks advancing this argument either do not understand or do not accept the notion that our farmers are as productive and smart and innovative and creative enough to meet the needs of food and fuel and feed and export.” . . . .

There are a number of recent biofuel projects at various stages in Kenya. Obviously this is controversial, but without the subsidies so far as I know these projects involve non-food crops,  UPDATE:  Here is a story this week in AFP about opposition to plans to grow jatropha on 50,000 hectares near Malindi on the Kenyan coast for the European ethanol market.

 

 

 

 

 

Am I a “Do Gooder”? Assessing my “East Africa” Footprint

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The VOA has a worthwhile five part series on increasing Western investment in Africa–start here.

A friend of mine recently suggested that I had become something of a “do gooder” while she had become more of a believer in free markets from a background more on the left politically.  Got me thinking about the totality of my interactions with East Africa.  I invest retirement savings in a U.S. traded fund of the stocks of companies with predominantly African business and the stocks of a few individual African companies and companies with significant African business.  Some of my retirement money is invested, outside of my desire or control, in the companies that market cigarettes in East Africa.  My wife and I make some private efforts to help with needs associated with a non-profit program serving underprivileged children in Nairobi, and helped raise some additional money for this through our church, where we also support the regular “mainstream” mission work.  We give a little bit of money to one of the big humanitarian relief organizations where I had some personal contact and a little bit of money to “The One Acre Fund“.  I pay my taxes toward the salary and benefits of the full spectrum of U.S. government employees and contractors living in Kenya from the Ambassador on down and all the infrastructure supporting them.  As a lawyer, my “day job” which I don’t write about here, is a matter of public record:  I work in a part of the “defense industry” in which we make the majority of the ships typically used to make up the U.S. Navy’s anti-piracy task force off the Horn of Africa.

When I lived in Kenya I tried to take advantage of the time I had to be among Kenyans rather than spending too much time among the expats, but my family and I did participate in a fair bit of tourism and patronized the usual Nairobi businesses that I have learned are to a substantial extent owned by people who got them through misuse of public office rather than through competition in a “free market”.  I do like the concept of free markets and will hope for more of them in Kenya in the future.

And I moralize on this blog, which is free.

So, on balance, I don’t think I make bona-fide “do gooder” status.   I will say that of all the problems and challenges at large in the world, the unintended consequences of the actions of “do gooders” don’t make it very high on my list at present.  I am all for skepticism and evaluation of effectiveness in aid programs, for instance, but I think ulterior or conflicting interests, and your basic greed and venality are much bigger problems than the negatives associated with well-intentioned but misguided or otherwise unsuccessful attempts to help people.  (Note that I don’t take responsibility for Government to Government assistance in my category of things that “do gooders” may be accountable for.)

Links to Start the Week

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Qaddafi demise helps African Union at Africa Works by G. Pascal Zachary:

The collapse of Qaddafi’s dictatorial regime in Africa has concrete benefits for the African Union, whose international standing has repeatedly been undermined by the Libyan leader’s eccentric Pan-Africanism and past embrace of terrorism. . . . . Qaddafi and Libyan cronies invested in African real estate but they never provided either finance or expertise to promote industrial enterprises. Should Qaddafi vanish permanently from the club of African leaders, the African Union will be the beneficiary. The AU struggles with legitimacy and effectiveness; Qaddafi made the tests of pragmatism and idealism much more difficult. His absence from the AU governing body will make the renovation of this disappointing regional body easier, though even without the burden of Qaddafi, the task facing reformers of the AU remains daunting.

In Uganda, a new inflation–in the price of votes, Jina Moore

Martha Karua, running for the Kenyan presidency next year, says Kibaki administration has increased extrajudicial killings from the level of the Moi administration.

Sixth Fleet Frigate USS Stephen W. Groves is  spending roughly two weeks at Dar Es Salaam for African Partnership Station program training East African sailors, along with some community relations.

“Real Conservatives Don’t Slash Foreign Aid:  What House Republicans Can Learn From David Cameron and the Tories” Thomas Carothers in The New Republic.

“Wako reserves his most potent sting for Kibaki” Emeka-Mayaka Gekara in the Daily Nation. A good example of how things really work in Kenyan politics.

“Somalia:  The Transition Government on Life Support” International Crisis Group report, February 21.  Says the international community has continued to fail to appreciate the reality that attempts to create a European-style centralized national government are doomed to failure.  The TFG is further hampered by corruption and irresponsibility.  Without serious progress and reform by August, the attention of the international support should shift:

Yet, the situation is not as bleak as it may seem. Some parts of Somalia, most notably Somaliland and Puntland in the north, are relatively stable, and as the ill-fated Union of Islamic Courts demonstrated in 2006, it is possible to rapidly reestablish peace and stability in central and south Somalia if the right conditions exist. Contrary to what is often assumed, there is little anarchy in the country. Local authorities administer most areas and maintain a modicum of law and order. Somalis and humanitarian agencies and NGOs on the ground know who is in charge and what the rules are and get on with their work. The way forward needs to be a more devolved political and security structure and far greater international support for local administrations.  Furthermore, if by August, the TFG has not made meaningful progress in coping with its internal problems and shown itself genuinely willing to work and share power with these local authorities, the international community should shift all its aid to them.